APPLICATION OF WARRANTIES AND CONSUMER GUARANTEES AND ACL AMENDMENT REMINDER

This article considers the question: do the consumer guarantees apply to goods and services where there is also a warranty in place?

If the customer meets the definition of consumer under the Australian Consumer Law (ACL), then, depending on the circumstances, both the consumer guarantees and the warranty may be applicable.

Warranties and Consumer Guarantees
A warranty operates as a contract between the person providing the warranty (the manufacturer or the supplier), and the consumer. It is a promise made by a manufacturer or a supplier to a consumer.
On the other hand, the consumer guarantees are a statutory guarantee provided under the ACL. Consumer guarantees apply automatically and cannot be contracted out of.

Know your obligations
Under the ACL both suppliers and manufacturers have obligations in respect of the consumer guarantees. If a warranty is given for a product the consumer guarantees will continue to apply and are not limited by the warranty.
Further, more than one person may have a consumer guarantee obligation in relation to the same product. This gives consumers several avenues to seek a remedy for the failure of a product, including:
• through the warranty (if there is one);
• through the supplier’s consumer guarantee obligation; or
• through the manufacturer’s consumer guarantee obligation.
Consumer guarantees apply for a reasonable period based on the nature of the product, meaning that the consumer guarantee may continue to apply to a product after a warranty period has expired.

Responsibility to assist consumers
The consumer guarantee obligations continue to apply to both suppliers and manufactures regardless of a warranty. Responsibility for assisting the consumer lies with the person the consumer approaches for assistance (provided the person has an obligation in relation to the product).
By way of example, both the supplier and manufacturer of a vehicle must meet consumer guarantee as to acceptable quality (ACL section 54), if the manufacturer also provides a one-year warranty on that vehicle, and the vehicle is defective so that the consumer guarantee as to acceptable quality has not been met and the claim can be made under the warranty, then:
• if the consumer approaches the manufacturer of the vehicle for a remedy during the one-year warranty period, the manufacturer has an obligation to provide a remedy pursuant to the warranty and the consumer guarantees;
• if the consumer approaches the manufacturer of the vehicle for a remedy after the one-year warranty expires, the manufacturer is obligated to provide a remedy pursuant to the consumer guarantees;
• if the consumer approaches the supplier of the vehicle for a remedy during the one-year warranty period (rather than the manufacturer), then the supplier is obligated to provide a remedy to the consumer pursuant to the consumer guarantees;
• if the consumer approaches the supplier of the vehicle for a remedy after the one-year warranty period has expired, then the supplier is obligated to provide a remedy to the consumer pursuant to the consumer guarantees.
As a general overview, if the supplier carries an obligation in relation to a consumer guarantee, then the supplier has an obligation to assist the consumer if approached and should not redirect the consumer to the manufacturer to obtain a remedy. Instead, the supplier may be able to seek an indemnity from the manufacturer (see below).

Indemnity in favour of the supplier
If a consumer guarantee has not been met, and the supplier has provided the consumer with a remedy, the supplier may be able to rely on the indemnity provided by the manufacturer in favour of the supplier under the ACL, in relation to the following:
• the consumer guarantee as to acceptable quality (ACL section 54);
• the consumer guarantee as to fitness for a disclosed purpose, which is made known by the consumer to the manufacturer either directly or through the supplier (ACL section 55);
• the consumer guarantee in relation to the description applied to the product by or on behalf of the manufacturer (or with the express or implied consent of the manufacturer) (ACL section 56).
If the supplier seeks to enforce the right of indemnity against the manufacturer the supplier must do so within three years of the earlier of the first day of the discharge of the liability or the day on which the consumer commenced proceedings against the supplier.

Reminder – ACL Amendment
Among other eligibility requirements to meet the definition of ‘consumer’ under the ACL, the monetary threshold for an individual or business to be a consumer for the purpose of the ACL will change from goods or services acquired for $40,000 or less, to $100,000 or less, on and from 1 July 2021. Please refer to Industry Legal Group’s March article, ‘Increased Access to Consumer Guarantee Remedies’, or contact Industry Legal Group for further information regarding the definition of ‘consumer’ under the ACL and its limitations.

Takeaways
The key takeaways are:
• The consumer guarantees continue to operate even where a warranty exists.
• A warranty does not limit the consumer guarantees.
• Consumer guarantees apply automatically and cannot be contracted out of.
• The supplier has a right of indemnity against the manufacture in certain circumstances.
• The monetary threshold to access consumer guarantee remedies increase to $100,000 on and from 1 July 2021.

This document is intended for general information purposes only and should not be regarded as legal advice. Please contact Industry Legal Group if you require legal advice.

Industry Legal Group provides advice to members on commercial law matters. If you have any questions relating to the above information, please contact Industry Legal Group on 1300 369 703 or aaaa@industrylegalgroup.com.au